EXECUTION DRAFT — PRIVILEGED & CONFIDENTIAL — Subject to Change Calderwood & Harkness LLP — C&H Matter Number: 1025-00007
GRANT OF SECURITY INTEREST
(PLEDGE AGREEMENT)
Execution Draft v2 — October 12, 2022
by and between
QUORUM RECEIVABLES FUNDING 2022-1 LLC a Delaware limited liability company, as Grantor
and
CALVONETH TRUST COMPANY, NATIONAL ASSOCIATION a national banking association, not in its individual capacity but solely as Indenture Trustee for the benefit of the Noteholders, as Secured Party
________________________________________
TABLE OF CONTENTS
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GRANT OF SECURITY INTEREST (PLEDGE AGREEMENT)
This GRANT OF SECURITY INTEREST (PLEDGE AGREEMENT) (this "Agreement"), dated as of October 12, 2022 (the "Closing Date"), is entered into by and between:
QUORUM RECEIVABLES FUNDING 2022-1 LLC, a Delaware limited liability company (the "Grantor" or the "Issuer"),
and
CALVONETH TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity but solely as indenture trustee (the "Trustee" or the "Secured Party") under the Indenture referred to below, for the ratable benefit of the Noteholders (as defined herein).
RECITALS
WHEREAS, Quorum Receivables Funding 2022-1 LLC is a Delaware limited liability company formed on August 3, 2022 (Delaware Secretary of State File No. 7894231) as a bankruptcy-remote special purpose entity, with its sole member being Quorum Receivables Holding LLC, a Delaware limited liability company ("QRH"), and its registered agent being Ashgrove Services Inc., 28 Liberty Street, New York, NY 10005;
WHEREAS, the Grantor is the Issuer under that certain Indenture (the "Indenture"), dated as of the Closing Date, between the Grantor and the Trustee, pursuant to which the Grantor is issuing: (i) $375,000,000 aggregate principal amount of Class A Notes (preliminary CUSIP: 74892TAA3), (ii) $75,000,000 aggregate principal amount of Class B Notes (preliminary CUSIP: 74892TAB1), and (iii) $35,000,000 aggregate principal amount of Class C Notes (preliminary CUSIP: 74892TAC9) (collectively, the "Notes"), representing a total issuance of $500,000,000 aggregate principal amount;
WHEREAS, the Notes are being offered in a private placement pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and Regulation S thereunder, and have not been and will not be registered under the Securities Act;
WHEREAS, the Notes are backed by a revolving pool of insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF"), a Delaware limited liability company and wholly owned subsidiary of Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation (NYSE: QIHC), headquartered at 400 Atlantic Street, Suite 2200, Stamford, CT 06901;
WHEREAS, the insurance premium finance receivables are transferred from QPF to QRH pursuant to that certain Receivables Sale Agreement, dated as of the Closing Date, between QPF, as seller, and QRH, as purchaser (the "Receivables Sale Agreement"), and from QRH to the Grantor pursuant to that certain Receivables Transfer Agreement, dated as of the Closing Date, between QRH, as transferor, and the Grantor, as transferee (the "Receivables Transfer Agreement"), and each such transfer is intended to constitute a "true sale" of such receivables;
WHEREAS, to secure the payment and performance of all obligations of the Grantor under the Indenture, the Notes, and the other Transaction Documents (as defined herein), the Grantor desires to grant to the Trustee, for the ratable benefit of the Noteholders, a first-priority security interest in all of the Grantor's right, title, and interest in and to the Collateral (as defined herein); and
WHEREAS, it is a condition precedent to the issuance of the Notes under the Indenture and the purchase of the Notes by Ridgeline Capital Markets LLC (the "Initial Purchaser") under the Note Purchase Agreement, dated as of the Closing Date, between the Grantor and the Initial Purchaser (the "Note Purchase Agreement"), that the Grantor execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.01 — Defined Terms
As used in this Agreement, the following terms shall have the following meanings:
"Account Control Agreement" means that certain Account Control Agreement, dated as of the Closing Date, among the Grantor, the Trustee (in its capacity as securities intermediary), and any other parties thereto, governing the establishment, maintenance, and control of the Accounts.
"Accounts" means, collectively, the Collection Account, the Payment Account, the Reserve Account, and the Liquidity Reserve Account, each maintained at the Trustee in its capacity as securities intermediary pursuant to the Account Control Agreement dated as of the Closing Date among the Grantor and the Trustee, together with any successor or replacement accounts established in accordance with the Transaction Documents.
"Administration Agreement" means that certain Administration Agreement, dated as of the Closing Date, among the Grantor and the administrator named therein.
"Agreement" means this Grant of Security Interest (Pledge Agreement), including all exhibits and schedules hereto, as amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Back-Up Servicer" means Northvane Bank, N.A., in its capacity as back-up servicer under the Back-Up Servicing Agreement.
"Back-Up Servicing Agreement" means that certain Back-Up Servicing Agreement, dated as of the Closing Date, among the Grantor, the Servicer, the Back-Up Servicer, and the Trustee.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in New York, New York, Houston, Texas, or Wilmington, Delaware are authorized or obligated by law, regulation, or executive order to close.
"Class A Notes" means the $375,000,000 aggregate principal amount of Class A Notes issued by the Grantor under the Indenture, rated AAA(cr) by Brindoval Ratings Inc. and Aaa(p) by Pinnacle Rating Services LLC, bearing the preliminary CUSIP number 74892TAA3.
"Class B Notes" means the $75,000,000 aggregate principal amount of Class B Notes issued by the Grantor under the Indenture, rated A(cr) by Brindoval Ratings Inc. and A1(p) by Pinnacle Rating Services LLC, bearing the preliminary CUSIP number 74892TAB1.
"Class C Notes" means the $35,000,000 aggregate principal amount of Class C Notes issued by the Grantor under the Indenture, rated BBB(cr) by Brindoval Ratings Inc. and Baa2(p) by Pinnacle Rating Services LLC, bearing the preliminary CUSIP number 74892TAC9.
"Closing Date" means October 12, 2022.
"Collateral" has the meaning assigned to such term in Section 2.01 of this Agreement.
"Collection Account" means the segregated trust account established and maintained in the name of the Trustee for the benefit of the Noteholders at the Trustee's Corporate Trust Office, into which all Collections are deposited in accordance with the Servicing Agreement and the Indenture.
"Collections" means all amounts received or collected in respect of the Receivables, including, without limitation, all principal payments, interest payments, fees, late charges, unearned premium refunds, insurance recoveries, and any other payments or proceeds of any kind whatsoever received by or on behalf of the Grantor with respect to the Receivables.
"Custodian" means Calvoneth Trust Company, National Association, in its capacity as custodian under the Custodian Agreement.
"Custodian Agreement" means that certain Custodian Agreement, dated as of the Closing Date, among the Grantor, the Servicer, the Custodian, and the Trustee.
"Cut-Off Date" means June 30, 2022.
"Early Amortization Event" has the meaning assigned to such term in the Indenture.
"Eligible Receivables" means insurance premium finance receivables that satisfy each of the eligibility criteria set forth in the Receivables Sale Agreement, including, without limitation, each of the following: (i) originated by QPF in the ordinary course of its business; (ii) denominated and payable in United States dollars; (iii) secured by a valid and enforceable assignment of unearned premium refund rights under the related insurance policy; (iv) having an original term not exceeding twelve (12) months; (v) the obligor thereunder is a U.S. commercial policyholder domiciled in one of the fifty (50) states of the United States or the District of Columbia; (vi) not in default (which, for this purpose, means no payment more than sixty (60) days past due as of the applicable date of determination); and (vii) originated in compliance with all applicable federal, state, and local laws, including, without limitation, applicable usury laws and state premium finance licensing requirements.
"Event of Default" has the meaning assigned to such term in Section 6.01 of this Agreement.
"Indenture" means that certain Indenture, dated as of the Closing Date, between the Grantor and the Trustee, as may be amended, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Independent Manager" means Timothy R. Callan, appointed by Fortbridge Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801, as the independent manager of the Grantor in accordance with the Grantor's limited liability company agreement.
"Initial Pool Balance" means the aggregate outstanding principal balance of all Receivables in the initial pool as of the Cut-Off Date, which amount equals $612,000,000.
"Initial Purchaser" means Ridgeline Capital Markets LLC, in its capacity as the initial purchaser of the Notes under the Note Purchase Agreement.
"Liquidity Facility" means the $25,000,000 revolving liquidity facility provided by Northvane Bank, N.A. ("Northvane") to the Grantor pursuant to the Liquidity Facility Agreement.
"Liquidity Facility Agreement" means that certain Liquidity Facility Agreement, dated as of the Closing Date, between the Grantor and Northvane Bank, N.A.
"Liquidity Reserve Account" means the segregated trust account established and maintained in the name of the Trustee for the benefit of the Noteholders at the Trustee's Corporate Trust Office, into which amounts drawn under the Liquidity Facility are deposited.
"LLC Agreement" means the Limited Liability Company Agreement of the Grantor, dated as of August 3, 2022, as amended, restated, supplemented, or otherwise modified from time to time.
"Northvane" means Northvane Bank, N.A., a national banking association, in its capacity as provider of the Liquidity Facility and as Back-Up Servicer.
"Note Purchase Agreement" means that certain Note Purchase Agreement, dated as of the Closing Date, between the Grantor and the Initial Purchaser.
"Noteholders" means the holders from time to time of the Notes, or any of them, as the context may require.
"Notes" means, collectively, the Class A Notes, the Class B Notes, and the Class C Notes.
"Obligations" means all present and future indebtedness, liabilities, and obligations of every kind and nature of the Grantor under or in connection with the Indenture, the Notes, and each other Transaction Document, howsoever arising, whether direct or indirect, absolute or contingent, due or to become due, whether now existing or hereafter arising, including, without limitation, all principal of and interest (including interest accruing after the commencement of any bankruptcy, insolvency, receivership, or similar proceeding, whether or not a claim for post-petition interest is allowed in such proceeding) on the Notes, all premiums, if any, all fees, all expenses, all indemnification obligations, and all other amounts payable by the Grantor under the Transaction Documents.
"Overcollateralization Amount" means $15,000,000, representing 3.0% of the total aggregate principal amount of the Notes.
"Payment Account" means the segregated trust account established and maintained in the name of the Trustee for the benefit of the Noteholders at the Trustee's Corporate Trust Office, from which payments to the Noteholders are made in accordance with the payment waterfall under the Indenture.
"Performance Guaranty" means that certain Performance Guaranty, dated as of the Closing Date, executed by QIH in favor of the Trustee for the benefit of the Noteholders.
"Permitted Liens" has the meaning assigned to such term in Section 4.03 of this Agreement.
"QPF" means Quorum Premium Finance LLC, a Delaware limited liability company and wholly owned subsidiary of QIH, in its individual capacity or, where the context so requires, in its capacity as the originator of the Receivables and as the Servicer.
"QRH" means Quorum Receivables Holding LLC, a Delaware limited liability company (Delaware Secretary of State File No. 7894228) and the sole member of the Grantor.
"QIH" means Quorum Insurance Holdings Corp., a Delaware corporation (NYSE: QIHC), headquartered at 400 Atlantic Street, Suite 2200, Stamford, CT 06901.
"Receivables" means the insurance premium finance receivables acquired by the Grantor from QRH pursuant to the Receivables Transfer Agreement, including the initial pool of receivables (consisting of approximately 82,400 loans with an aggregate outstanding principal balance of $612,000,000 as of the Cut-Off Date, and having a weighted average annual percentage rate of 7.85%) and all additional receivables acquired by the Grantor during the Revolving Period in accordance with the Transaction Documents, together with all related rights, claims, and interests.
"Receivables Sale Agreement" means that certain Receivables Sale Agreement, dated as of the Closing Date, between QPF, as seller, and QRH, as purchaser, pursuant to which QPF sells and transfers insurance premium finance receivables to QRH.
"Receivables Transfer Agreement" means that certain Receivables Transfer Agreement, dated as of the Closing Date, between QRH, as transferor, and the Grantor, as transferee, pursuant to which QRH sells, transfers, and assigns insurance premium finance receivables to the Grantor.
"Reserve Account" means the segregated trust account established and maintained in the name of the Trustee for the benefit of the Noteholders at the Trustee's Corporate Trust Office, funded initially in an amount equal to the Overcollateralization Amount.
"Revolving Period" means the period commencing on the Closing Date and ending on the date that is twenty-four (24) months after the Closing Date, or such earlier date as an Early Amortization Event shall have occurred, during which the Grantor may acquire additional Receivables with Collections.
"Secured Obligations" has the same meaning as Obligations.
"Servicer" means Quorum Premium Finance LLC, in its capacity as servicer of the Receivables under the Servicing Agreement, or any successor servicer appointed in accordance therewith.
"Servicing Agreement" means that certain Servicing Agreement, dated as of the Closing Date, among the Grantor, the Servicer, and the Trustee, as amended, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Termination Date" has the meaning assigned to such term in Section 8.01 of this Agreement.
"Transaction Documents" means, collectively, the Indenture, the Notes, the Receivables Sale Agreement, the Receivables Transfer Agreement, the Servicing Agreement, the Back-Up Servicing Agreement, the Administration Agreement, the Note Purchase Agreement, the Liquidity Facility Agreement, the Account Control Agreement, the Custodian Agreement, this Agreement, the Performance Guaranty, and all other related documents, instruments, certificates, and agreements entered into in connection with the transactions contemplated hereby and thereby, in each case as amended, restated, supplemented, or otherwise modified from time to time.
"Trustee" means Calvoneth Trust Company, National Association, a national banking association, acting not in its individual capacity but solely as indenture trustee under the Indenture, or any successor trustee appointed thereunder. The Trustee's Corporate Trust Office is located at 600 Travis Street, Suite 5800, Houston, TX 77002, and its designated Senior Trust Officer is Gerald K. Fontaine.
"UCC" means the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction, including, as applicable, the UCC as in effect in the State of New York or the State of Delaware.
Section 1.02 — Rules of Interpretation
(a) Unless the context otherwise requires, terms defined in the UCC (including, without limitation, Articles 8 and 9 thereof) that are used but not otherwise defined herein shall have the respective meanings set forth in the UCC as in effect from time to time in the State of New York.
(b) All references in this Agreement to Articles, Sections, Exhibits, and Schedules are to Articles, Sections, Exhibits, and Schedules of this Agreement, unless otherwise expressly specified.
(c) This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of New York, without giving effect to any conflict of laws principles thereof (other than Section 5-1401 of the New York General Obligations Law), provided that references to the UCC for purposes of determining the creation, attachment, perfection, and priority of security interests shall mean the UCC as in effect in the applicable jurisdiction (which, for filing purposes, shall be the State of Delaware).
(d) All headings and captions contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of any provision of this Agreement.
(e) Unless the context otherwise requires, words importing the singular number include the plural and vice versa, words importing the masculine gender include the feminine and neuter genders, and references to "including" or "include" shall mean "including, without limitation."
(f) References to any Person shall include such Person's successors and permitted assigns.
(g) References to any agreement, instrument, or document shall mean such agreement, instrument, or document as amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
Section 1.03 — Incorporation of Indenture Definitions
Capitalized terms used in this Agreement and not otherwise defined herein shall have the respective meanings assigned to such terms in the Indenture. In the event of any inconsistency between the definition of any term in this Agreement and the definition of such term in the Indenture, the definition in the Indenture shall control, except as expressly provided otherwise in this Agreement.
ARTICLE II — GRANT OF SECURITY INTEREST
Section 2.01 — Grant
As collateral security for the full and timely payment and performance of all Obligations, the Grantor hereby irrevocably grants, assigns, conveys, pledges, hypothecates, and transfers to the Trustee, for the ratable benefit of the Noteholders, a continuing first-priority security interest in all of the Grantor's right, title, and interest in, to, and under the following property, whether now owned or existing or hereafter acquired or arising and wherever located (collectively, the "Collateral"):
(a) Receivables. All insurance premium finance receivables now or hereafter acquired by the Grantor pursuant to the Receivables Transfer Agreement or otherwise, including the initial pool of approximately 82,400 insurance premium finance loans with an aggregate outstanding principal balance of $612,000,000 as of the Cut-Off Date of June 30, 2022, and all additional receivables acquired by the Grantor during the twenty-four (24) month Revolving Period, together with all rights, remedies, and claims of the Grantor against the obligors thereunder and all rights of the Grantor under the related insurance premium finance agreements and promissory notes;
(b) Unearned Premium Refund Rights. All rights to receive unearned premium refunds from insurance carriers and their agents with respect to the Receivables, including, without limitation, all claims, demands, causes of action, and rights to payment arising from the cancellation, termination, or non-renewal of the insurance policies financed by the Receivables, and all powers of attorney and other authorizations granted by the obligors to the Grantor or the Servicer in connection therewith;
(c) Collections. All Collections, payments, recoveries, and proceeds received or receivable in respect of the Receivables, including, without limitation, all principal payments, interest payments, fees, late charges, prepayment penalties (if any), unearned premium refunds, insurance recoveries, and any other amounts collected or received by or on behalf of the Grantor with respect to the Receivables;
(d) Accounts. All deposit accounts, securities accounts, and other accounts maintained by or on behalf of the Grantor in connection with the transactions contemplated by the Transaction Documents, including, without limitation, the Collection Account, the Payment Account, the Reserve Account, and the Liquidity Reserve Account, together with all funds, financial assets, investment property, securities, securities entitlements, and other amounts at any time held therein, credited thereto, or on deposit therein, and all certificates and instruments, if any, from time to time representing or evidencing any of the foregoing;
(e) Transaction Document Rights. All rights of the Grantor under the Receivables Transfer Agreement, the Servicing Agreement, the Back-Up Servicing Agreement, the Administration Agreement, the Liquidity Facility Agreement, the Account Control Agreement, the Custodian Agreement, and the Performance Guaranty, including, without limitation, all rights to receive payments thereunder, all rights to enforce the obligations of the counterparties thereto, all rights to exercise remedies thereunder, and all rights to receive notices, consents, and communications thereunder;
(f) Liquidity Facility Rights. All rights of the Grantor under the Liquidity Facility Agreement to draw upon the $25,000,000 committed liquidity facility provided by Northvane Bank, N.A., including all rights to receive advances, all rights to demand performance, and all rights to enforce the obligations of Northvane thereunder;
(g) Insurance Proceeds. All proceeds of any and all insurance policies maintained with respect to the Collateral, if any, including, without limitation, any fidelity bonds, errors and omissions insurance, or other insurance coverage required to be maintained pursuant to the Transaction Documents;
(h) Books and Records. All books, records, ledgers, files, correspondence, and data (including, without limitation, electronic data, computer software, programs, tapes, disks, and related documentation) relating to the Receivables, the Collections, and the Accounts, in whatever medium maintained;
(i) General Intangibles. All general intangibles and payment intangibles (each as defined in the UCC) related to or arising from any of the foregoing, including, without limitation, all rights to payment, all contract rights, all choses in action, all rights to indemnification, and all intellectual property rights related to the servicing or collection of the Receivables; and
(j) Proceeds. All proceeds (as defined in UCC Section 9-102) of any and all of the foregoing Collateral, in whatever form, including, without limitation, all cash and non-cash proceeds, all proceeds of proceeds, all products, rents, profits, and revenues of or from any of the foregoing, and all insurance proceeds and condemnation awards with respect to any of the foregoing.
Section 2.02 — Security for Obligations
The security interest granted herein secures the full and timely payment and performance of all Obligations of the Grantor under or in connection with the Transaction Documents, including, without limitation:
(a) all principal of and interest on the Class A Notes (in the aggregate principal amount of $375,000,000), the Class B Notes (in the aggregate principal amount of $75,000,000), and the Class C Notes (in the aggregate principal amount of $35,000,000);
(b) all fees and expenses owed to the Trustee, including the annual trustee fee of $35,000 per annum and the per-payment-date fee of $5,000 per payment date, and all other amounts payable to the Trustee pursuant to the Indenture and this Agreement;
(c) all indemnification obligations of the Grantor to the Trustee, the Noteholders, and any other Person under the Transaction Documents;
(d) all costs and expenses (including, without limitation, reasonable and documented attorneys' fees and disbursements) incurred by the Trustee in enforcing, protecting, or preserving the security interest granted herein or in exercising any rights or remedies hereunder or under applicable law; and
(e) all other amounts from time to time owing by the Grantor under or in connection with the Transaction Documents, whether for principal, interest, premium, fees, expenses, indemnities, or otherwise, and whether now existing or hereafter arising.
Section 2.03 — Continuing Security Interest; Grant Irrevocable
The grant of a security interest pursuant to this Article II constitutes a continuing security interest in the Collateral and shall remain in full force and effect until the Termination Date (as defined in Section 8.01). The grant of the security interest herein is irrevocable during the term of this Agreement. No course of dealing between the Grantor and the Trustee, nor any failure to exercise, nor any delay in exercising, any right, power, or privilege hereunder or under the Indenture or any other Transaction Document, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power, or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.
Section 2.04 — Back-Up Security Interest
To the extent that any court of competent jurisdiction determines, or in the event that, any transfer of Receivables from QPF to QRH pursuant to the Receivables Sale Agreement, or from QRH to the Grantor pursuant to the Receivables Transfer Agreement, is recharacterized as a secured loan or secured financing rather than a true sale or absolute transfer, then this Agreement shall also be deemed to grant to the Trustee, for the ratable benefit of the Noteholders, a first-priority security interest in all of the Grantor's right, title, and interest in and to all such Receivables and all related Collateral (including, without limitation, all Collections, Unearned Premium Refund Rights, and proceeds thereof) as a back-up security interest to secure all Obligations. This Section 2.04 is intended solely as a precautionary measure and shall not be deemed an admission by any party that any such transfer does not constitute a true sale. The perfection provisions of Article III hereof shall apply with equal force to any back-up security interest created under this Section 2.04.
ARTICLE III — PERFECTION
Section 3.01 — Filing of Financing Statements
(a) The Grantor hereby authorizes the Trustee to file, and the Grantor shall cooperate with the Trustee in filing, UCC-1 financing statements (and any amendments, continuation statements, and other filings related thereto) with the Delaware Secretary of State (the "UCC Filing Jurisdiction") naming the Grantor (exact legal name: Quorum Receivables Funding 2022-1 LLC; Federal Employer Identification Number: 88-1247653; Delaware Secretary of State File Number: 7894231) as debtor and the Trustee (Calvoneth Trust Company, National Association) as secured party, covering all of the Collateral described in Section 2.01. The form of such UCC-1 financing statement is attached hereto as Exhibit B.
(b) The Grantor hereby authorizes the Trustee to file such financing statements without the signature of the Grantor to the extent permitted by applicable law, including Section 9-509 of the Delaware UCC. The Grantor shall execute and deliver to the Trustee such financing statements and any continuation statements, amendments, or other filings as the Trustee may reasonably request from time to time to maintain the perfection and priority of the security interest granted herein.
(c) The Grantor agrees that a carbon, photographic, or other reproduction of this Agreement or of any UCC-1 financing statement covering the Collateral shall be sufficient as a financing statement and may be filed in lieu of the original where permitted by applicable law.
(d) The Grantor shall pay all fees and costs associated with the filing of any financing statement, continuation statement, amendment, or other filing contemplated by this Section 3.01.
Section 3.02 — Control of Accounts
(a) Perfection of the security interest in all deposit accounts shall be achieved and maintained through "control" (as defined in UCC Section 9-104 of the applicable jurisdiction) pursuant to the Account Control Agreement among the Grantor and the Trustee (in its capacity as securities intermediary and depository bank). The Trustee is the bank at which the Collection Account, Payment Account, Reserve Account, and Liquidity Reserve Account are maintained, and the Trustee hereby agrees that it will comply with instructions originated by the Trustee (in its capacity as Secured Party) directing the disposition of funds in such accounts without further consent of the Grantor.
(b) Perfection of the security interest in all securities accounts and the financial assets and securities entitlements credited thereto shall be achieved and maintained through "control" (as defined in UCC Section 8-106 of the applicable jurisdiction) pursuant to the Account Control Agreement. The Trustee, as securities intermediary, shall treat all financial assets credited to any securities account as "financial assets" within the meaning of UCC Section 8-102(a)(9).
(c) The Trustee shall at all times maintain control over the Collection Account, the Payment Account, the Reserve Account, and the Liquidity Reserve Account. The Grantor shall not take any action to diminish or impair the Trustee's control over any Account.
Section 3.03 — Delivery of Instruments and Tangible Chattel Paper
To the extent that any Receivable constituting Collateral is evidenced by a tangible instrument (as defined in UCC Section 9-102) or tangible chattel paper (as defined in UCC Section 9-102), the Grantor shall promptly deliver, or cause to be delivered, the original of each such instrument and chattel paper to the Trustee or to the Custodian (Calvoneth Trust Company, National Association, in its capacity as custodian under the Custodian Agreement), together with all necessary endorsements and assignments, sufficient to perfect the Trustee's security interest therein by possession or delivery under UCC Section 9-313 or Section 9-330, as applicable. All such instruments and chattel paper delivered to the Custodian shall be held by the Custodian on behalf of and for the benefit of the Trustee, as Secured Party.
Section 3.04 — Further Assurances
The Grantor shall, at its own expense, promptly take all actions and execute and deliver all documents, instruments, and agreements that are necessary or desirable, or that the Trustee may reasonably request, in order to: (a) create, attach, perfect, and maintain the first-priority perfected security interest of the Trustee in the Collateral; (b) protect the Collateral against the rights, claims, or interests of any third party; (c) enable the Trustee to exercise and enforce its rights and remedies hereunder with respect to the Collateral; and (d) otherwise carry out the purposes and intent of this Agreement. Without limiting the generality of the foregoing, the Grantor shall execute and deliver, or cause to be executed and delivered, additional financing statements (including financing statements covering after-acquired property), and shall file or cause to be filed such financing statements in such additional jurisdictions as the Trustee may reasonably request from time to time.
Section 3.05 — Power of Attorney
The Grantor hereby irrevocably constitutes and appoints the Trustee as its true and lawful attorney-in-fact, with full power of substitution and resubstitution, to execute and file, in the name of the Grantor or in the name of the Trustee, financing statements, continuation statements, and amendments thereto, and to take any and all other actions that the Trustee may deem necessary or desirable to perfect, protect, or enforce the security interest granted herein, including, without limitation, the right to endorse the Grantor's name on any checks, notes, drafts, or other items of payment or instruments that may come into the Trustee's possession and to sign the Grantor's name on any invoices, shipping documents, or similar documents relating to the Collateral. This power of attorney is coupled with an interest and is irrevocable until the Termination Date. The Trustee agrees that it shall not exercise its rights under this power of attorney unless an Event of Default has occurred and is continuing, except with respect to the filing of financing statements, continuation statements, and amendments, which may be filed at any time.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE GRANTOR
The Grantor hereby represents and warrants to the Trustee, for the benefit of the Noteholders, as of the Closing Date and as of each date on which additional Receivables are acquired during the Revolving Period, as follows:
Section 4.01 — Organization and Authority
(a) The Grantor is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware, formed on August 3, 2022, and filed with the Delaware Secretary of State under File No. 7894231.
(b) The Grantor's sole member is Quorum Receivables Holding LLC, a Delaware limited liability company (Delaware Secretary of State File No. 7894228). The Grantor has no subsidiaries and is not a partner or member of any other entity.
(c) The Grantor has all requisite limited liability company power and authority to own or hold its properties (including the Collateral), to conduct its business as presently conducted, and to execute, deliver, and perform this Agreement and each other Transaction Document to which it is a party, and to grant the security interest contemplated herein.
(d) The execution, delivery, and performance of this Agreement and each other Transaction Document to which the Grantor is a party have been duly authorized by all necessary limited liability company action on the part of the Grantor, including, without limitation, the written consent of the Grantor's sole member and the affirmative vote or consent of the Independent Manager, Timothy R. Callan (appointed by Fortbridge Corporate Services LLC, 1209 Orange Street, Wilmington, Delaware 19801), as required by the Grantor's LLC Agreement. No further action or approval is required for the Grantor to execute, deliver, and perform this Agreement.
Section 4.02 — Enforceability
This Agreement has been duly executed and delivered by the Grantor and constitutes the legal, valid, and binding obligation of the Grantor, enforceable against the Grantor in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 4.03 — No Liens
The Collateral is, and at all times shall be, free and clear of all liens, security interests, pledges, charges, claims, encumbrances, and interests of any kind whatsoever, other than the following (collectively, "Permitted Liens"):
(a) the security interest granted to the Trustee pursuant to this Agreement;
(b) the security interests granted to the Trustee under the Indenture;
(c) the interests of the Trustee as securities intermediary under the Account Control Agreement; and
(d) such other liens, if any, as are expressly permitted by the Indenture.
No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except those filed or to be filed in favor of the Trustee in connection with the transactions contemplated by the Transaction Documents.
Section 4.04 — Title to Collateral
The Grantor is the legal and beneficial owner of, or otherwise has sufficient rights in, all Collateral in which it purports to grant a security interest hereunder, free and clear of any lien, claim, or encumbrance other than Permitted Liens. The Grantor has not sold, transferred, assigned, or otherwise disposed of any interest in the Collateral other than as expressly contemplated by the Transaction Documents. All Receivables included in the Collateral have been acquired by the Grantor from QRH pursuant to the Receivables Transfer Agreement, and the Grantor's acquisition of such Receivables constitutes a valid transfer of ownership thereof to the Grantor.
Section 4.05 — Location; Jurisdiction
(a) The Grantor is organized under the laws of the State of Delaware. For purposes of UCC Article 9, the Grantor's "location" (as determined under UCC Section 9-307) is the State of Delaware.
(b) The Grantor's registered agent for service of process in the State of Delaware is Ashgrove Services Inc., 28 Liberty Street, New York, NY 10005.
(c) The Grantor's organizational identification number with the Delaware Secretary of State is File No. 7894231.
(d) The Grantor's federal employer identification number is 88-1247653.
(e) The Grantor's chief executive office and principal place of business is located at c/o Quorum Insurance Holdings Corp., 400 Atlantic Street, Suite 2200, Stamford, CT 06901.
Section 4.06 — Legal Name
(a) The exact legal name of the Grantor, as it appears on its Certificate of Formation filed with the Delaware Secretary of State on August 3, 2022, is "Quorum Receivables Funding 2022-1 LLC."
(b) The Grantor has not, at any time since its formation, changed its legal name, adopted any trade name, done business under any other name, or changed its identity or corporate structure. The Grantor has no trade names, fictitious names, or assumed names.
Section 4.07 — No Conflicts
The execution, delivery, and performance of this Agreement and the grant of the security interest herein do not and will not: (a) violate, conflict with, or result in a breach of any provision of the Grantor's Certificate of Formation or LLC Agreement; (b) violate any law, rule, regulation, order, writ, judgment, injunction, decree, or award applicable to the Grantor or any of its properties or assets; (c) violate any order, judgment, decree, or ruling of any court or governmental authority binding on the Grantor; or (d) conflict with, result in a breach of, or constitute a default (or give rise to any right of termination, amendment, cancellation, or acceleration) under any material contractual obligation, agreement, or instrument to which the Grantor is a party or by which the Grantor or any of its properties or assets is bound.
Section 4.08 — Validity and Characteristics of Receivables
(a) As of the Cut-Off Date of June 30, 2022, the initial pool of Receivables included as Collateral hereunder consists of approximately 82,400 insurance premium finance loans with the following characteristics:
(b) Each Receivable included in the initial pool as of the Cut-Off Date meets, in all material respects, the Eligible Receivables criteria set forth in the Receivables Sale Agreement.
(c) The information set forth in the data files delivered to the Trustee and the Custodian with respect to the Receivables is true and correct in all material respects as of the Cut-Off Date.
Section 4.09 — Compliance with Laws
(a) All Receivables included in the Collateral have been originated by QPF in compliance in all material respects with all applicable federal, state, and local laws, rules, and regulations, including, without limitation, applicable usury laws, truth-in-lending laws, and state premium finance licensing requirements.
(b) QPF is duly licensed as a premium finance company in all fifty (50) states of the United States and the District of Columbia, and all such licenses are in full force and effect and in good standing.
(c) The Grantor is in compliance in all material respects with all laws, rules, regulations, orders, and decrees applicable to it and its business, properties, and assets.
Section 4.10 — No Bankruptcy Filing
(a) The Grantor has not filed, and does not have any present intention to file, a voluntary petition in bankruptcy under Title 11 of the United States Code or any similar federal, state, or foreign law. No involuntary petition in bankruptcy or any similar proceeding has been filed against the Grantor, and no proceeding seeking to appoint a receiver, liquidator, conservator, trustee, sequestrator, or similar official for the Grantor or any substantial part of its property is pending or, to the Grantor's knowledge, threatened.
(b) The Grantor is a bankruptcy-remote special purpose entity, formed solely for the purpose of acquiring the Receivables and issuing the Notes. The Grantor's LLC Agreement contains separateness covenants and requires the affirmative consent of the Independent Manager prior to any voluntary filing of a petition in bankruptcy or any similar action.
(c) The Grantor is solvent and will not be rendered insolvent by the transactions contemplated by the Transaction Documents.
Section 4.11 — Tax Status
(a) The Grantor will not be treated as a separate taxable entity for United States federal income tax purposes. The Grantor is treated as a "disregarded entity" within the meaning of Treasury Regulation Section 301.7701-3, or, alternatively, as a qualifying special purpose entity as applicable under the relevant provisions of the Internal Revenue Code of 1986, as amended.
(b) The Grantor's federal employer identification number is 88-1247653.
(c) The Grantor has filed, or has caused to be filed, all tax returns and reports required to be filed by it, and has paid, or has caused to be paid, all taxes, assessments, fees, and other governmental charges that are due and payable (except to the extent being contested in good faith by appropriate proceedings and for which adequate reserves have been established).
ARTICLE V — COVENANTS OF THE GRANTOR
The Grantor hereby covenants and agrees with the Trustee, for the benefit of the Noteholders, as follows:
Section 5.01 — Maintenance of Security Interest
The Grantor shall take all steps necessary to create, maintain, protect, and preserve the first-priority, perfected security interest of the Trustee in the Collateral at all times during the term of this Agreement. Without limiting the generality of the foregoing, the Grantor shall cause all continuation statements to be timely filed with respect to the UCC-1 financing statements filed hereunder (which, under current Delaware law, must be filed within the six-month period prior to the expiration of each five-year effectiveness period) and shall promptly take such other actions as may be necessary or desirable to ensure the continued perfection and first-priority status of the Trustee's security interest in the Collateral.
Section 5.02 — Protection of Collateral
The Grantor shall not sell, transfer, assign, exchange, pledge, hypothecate, grant any option with respect to, or otherwise dispose of any Collateral or any interest therein, except as expressly permitted under the Transaction Documents. Without limiting the foregoing, the Grantor may distribute Collections in accordance with the payment waterfall set forth in the Indenture and may acquire additional Receivables during the Revolving Period in accordance with the terms of the Receivables Transfer Agreement and the Indenture. The Grantor shall take all commercially reasonable steps to protect the Collateral from loss, theft, damage, or impairment.
Section 5.03 — No Additional Liens
The Grantor shall not create, incur, assume, or suffer to exist any lien, security interest, pledge, charge, claim, encumbrance, or other interest on or with respect to any Collateral, other than Permitted Liens. The Grantor shall promptly, at its own expense, take such action as may be necessary to discharge any lien, security interest, or encumbrance on the Collateral that is not a Permitted Lien.
Section 5.04 — Name Change; Relocation
The Grantor shall not: (a) change its legal name or any trade name under which it does business; (b) change its organizational form (including by merger, consolidation, or conversion); (c) change its jurisdiction of organization; or (d) change its organizational identification number, in each case without at least thirty (30) days' prior written notice to the Trustee. Prior to any such change, the Grantor shall take all actions reasonably requested by the Trustee to maintain the perfection and priority of the Trustee's security interest in the Collateral, including, without limitation, the filing of appropriate amendments to financing statements in all applicable jurisdictions.
Section 5.05 — Maintenance of Accounts
(a) The Grantor shall maintain all Accounts at the Trustee (in its capacity as securities intermediary) and shall not establish any new deposit account, securities account, or other account at any bank or financial institution without the prior written consent of the Trustee. Any new account so established shall promptly be made subject to an account control agreement in form and substance satisfactory to the Trustee.
(b) All Collections received by or on behalf of the Grantor shall be deposited into the Collection Account within two (2) Business Days of receipt. The Grantor shall not commingle any Collections with any other funds of the Grantor, its affiliates, or any other Person.
Section 5.06 — Compliance with Concentration Limits
During the Revolving Period, the Grantor shall ensure that the pool of Receivables held as Collateral complies at all times with the following concentration limits:
(a) Single Obligor Limit. No single obligor shall represent more than 0.75% of the aggregate outstanding principal balance of the pool of Receivables;
(b) Single State Limit. No single state shall represent more than 20% of the aggregate outstanding principal balance of the pool of Receivables (based on the location of the obligor's principal place of business); and
(c) Single Insurance Carrier Limit. No single insurance carrier shall represent more than 15% of the aggregate outstanding principal balance of the pool of Receivables (based on the insurance carrier underlying the financed insurance policy).
In the event that the pool of Receivables fails to comply with any of the foregoing concentration limits as of any date of determination, the Grantor shall promptly notify the Trustee in writing and shall take all commercially reasonable steps to bring the pool into compliance within thirty (30) days of such failure.
Section 5.07 — Reporting
The Grantor shall, or shall cause the Servicer (QPF) to, deliver to the Trustee, in accordance with the terms and time periods set forth in the Servicing Agreement and the Indenture, periodic reports regarding the Collateral, including, without limitation, monthly servicer reports containing the following information: (a) the aggregate outstanding principal balance of the pool of Receivables; (b) the number of Receivables in the pool; (c) delinquency rates (30-day, 60-day, and 90-day); (d) net loss rates and loss experience; (e) Collections received during the applicable period; (f) the balance in each Account; (g) concentration limit compliance data; and (h) such other information as the Trustee or the Noteholders may reasonably request. All such reports shall be delivered to the Trustee no later than the fifteenth (15th) Business Day following the end of each collection period.
Section 5.08 — Books and Records
The Grantor shall maintain, or shall cause to be maintained, complete and accurate books and records with respect to the Collateral, separate and distinct from the books and records of QIH, QPF, QRH, and any other affiliated entity. Such books and records shall be consistent with the separateness covenants and bankruptcy-remoteness provisions set forth in the Grantor's LLC Agreement. The Grantor shall permit the Trustee, or its authorized representatives, to inspect, audit, and make copies of such books and records at any reasonable time during normal business hours, upon reasonable prior notice.
Section 5.09 — Insurance
The Grantor shall maintain, or shall cause to be maintained, all insurance coverage as required by the Transaction Documents, including, without limitation, any errors and omissions insurance, fidelity bonds, or other insurance coverage required by the Indenture, the Servicing Agreement, or any other Transaction Document.